Jean-Claude Trichet, president of the European Central Bank, has warned that
more protectionist pressures might be in the pipeline and that countries
must remain vigilant as a result.

During a speech at the World Policy Conference in Marrakech, Mr Trichet said that “while a repetition of the experience of the 1930s is very fortunately not on the cards, there is certainly no room for complacency and vigilance needs to remain high”.

Speaking around the subject of global economic governance in the wake of the financial crisis, Mr Trichet said a distinctive feature of the decade before the crisis had been a “progressive and largely beneficial trade liberalisation and integration”, which had “benefited consumers the world over”.

He said that, during the crisis, protectionist and “beggar-thy-neighbour” policies could have been expected in “such dire circumstances and given the political difficulties associated to them”.

But the central banker added that there had only been a moderate increase in actual protectionist measures to restrict trade and a significant outbreak of trade protectionism had been avoided since the start of the crisis.

Yet he warned that “more protectionist pressures might be on the pipeline” and urged vigilance. “First, evidence from surveys shows that public pressure for more economic protection not only has been mounting since the mid-2000s, namely well ahead of the crisis, but has intensified since its start and particularly in the most recent months,” he said.

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His comments came asChina hit back at the US government’s decision to launch an investigation into charges that it subsidises green technology producers, saying the move sent a wrong signal on trade protectionism.

Speaking on the European Union’s moves to put its house in order as part of its contribution to global economic and financial stability, Mr Trichet said that more ambitious reforms of European Union budget rules were needed for the eurozone than those proposed by the European Commission.

Referring to the Commission’s proposals to strengthen economic governance, published on September 29, Mr Trichet said: “A number of the Commission’s proposals are going in the right direction, but for the euro area more ambitious reforms are needed to ensure the smooth functioning of monetary union.”

He added that all deadlines under the excessive deficit procedure should be signifiacntly reduced; sanctions should be applied quasi-automatically and the debt reduction should in some cases be more amibtious than proposed by the Commission.

Responding to a question about the plans of the US Federal Reserve - which has opened the door to another round of quantiative easing - Mr Trichet said that “no central bank finds it appropriate to raise inflation at present”.

He added that he was “completely against” changing the euro area’s inflation target, saying that raising the 2pc target would have “disastrous consequences” for inflation expectations and would increase volatility.

Mr Trichet went onto say that governments need to run balanced budgets in the medium term to boost confidence among businesses and consumers: “The recovery comes from confidence.”